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ID: ST10299

Evaluation of the financial reporting standards

Introduction:

The purpose of this report is to analyze the implementation of International Financial Reporting Standards (IFRS) in various countries including Oman, Singapore and India and the differences in financial reporting in terms of investment strategies in Gulf International Chemicals SAOG (GIC)) and its market performance. Gulf International Chemicals SAOG (GIC) has been established in Oman since 1996 and is a construction chemical company. As headquartered in Oman, the company operates as a public-owned firm and is part of MSM. Gulf International Chemicals SAOG (GIC) cooperates with the production and sale of premium quality construction chemicals including adhesives and bonding agents, concrete and mortar installations, concrete and repair connectors, grouts and anchors, industrial flooring etc. Gulf International Chemicals SAOG (GIC) compiles the financial statements in accordance with International Financial Reporting Standards (IFRS) and the relevant disclosure requirements as set by the Capital Market Authority (CMA) and the applicable Companies Companies Act 2019

Discussion:

L03: Evaluation of the financial reporting standards and theoretical models and concepts:

Financial reporting standards refer to a set of principles and standards that define accounting policies and operating guidelines and serve as its basis. The inclusion of financial reporting standards helps to increase the visibility of financial reporting globally. The adoption of international financial reporting standards is essential in facilitating cross-border transactions and ensuring free international flow of funds. Lack of internationally accepted financial reporting standards can make it challenging to undertake transit activities that lead to increased costs, risks and expertise in the creation of financial statements. This also affects investor decision-making and increases the level of risk. This can affect investors in the search for investment opportunities globally and can make it difficult for international operations to operate. The basis of the calculation will be different if it is different financial reporting standards apply and this may affect financial performance and financial position. For example, a company can target profits using one set of country reporting and loss rates using another (IFRS, 2020)

i. Benefits of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS): Global Accounting Standards are beneficial because they help to ensure transparency, increased accountability and efficiency in the global financial market. This allows investors and business owners to make economically sound decisions regarding investment and risk. It also improves the distribution of capital. The use of IAS in GIC will go a long way in improving performance and increasing responsiveness.

ii. The inclusion of benefits of IFRS standards to improve accountability by reducing the information gap between funders and providers This standard provides the necessary information to keep managers accountable for their actions. This standard is important for regulators around the world. These levels lead to better economic performance by allowing awareness of the opportunities and risks that exist globally, which facilitates fair budgeting. The use of a single, reliable accounting language reduces financial costs and global costs.

iii. Evaluate the models of financial reporting and auditing:

Some of the models and theories of financial reporting are:

· Equity theory:

Equality theory has key ideas to offer and these are Proprietary Theory, Theory Theory, Fund Theory, Residual Equity Theory and Enterprise Theory.

· Proprietary theory has emphasized the accounting process in firms focused on shareholder perspective. The calculation of doctrine is as follows:

Assets – Liabilities = Proprietor’s Equity

· In view of the residual equity, it is necessary to make an accounting based on the opinion of the remaining shareholders. This is in line with regular shareholders about future concerns.

· The business idea keeps the business unit as the center of accounting process on behalf of the owner. Accounting statistics according to this view

Asset = Equities or

Assets = Liabilities + Shareholders’ Equity

· The basis of the fund study is the accounting process for a group of assets and liabilities associated with the restriction of donkeys as a fund. Accordingly, funds / resources and limits on their use are included in the business unit. Its accounting equation is as follows:

Assets = Restriction of Assets

· Legitimacy theory:Legitimacy means the idea that a business action is expected, efficient and appropriate for a community-developed, values, beliefs, norms and definitions. Company disclosure policies may affect external views regarding the company. Firms will achieve strategic legitimacy and change the legitimacy and perceptions held by the outside world. This concept is often used for the purpose of providing insight into the disclosure of a social, environmental and company report. This view is appropriate as a framework for disclosing financial reporting and stakeholder engagement (Manukriti, 2014)

L04: Evaluate international differences in financial reporting:

iv. Analysis of the differences an importance of financial reporting across different countries (Oman, Singapore and India):

As mentioned in the case presented, GIC has plans to expand in India and Singapore so comparisons between the financial reporting standards of the three countries namely Oman, India and Singapore are important. The accounting model used in countries including the US, India, Canada, the Netherlands and Australia is Anglo American model while countries like France, Germany, Italy use the Continental European model. While the Anglo Saxon model is characterized by greater administrative power, in addition to investment, regulatory output and short-term crisis, the Continental European model has greater shareholder power, conflict of interest, has limited financial resources and facilitates cash flow..

Singapore : The accounting standards used in Singapore are by the Singapore Financial Reporting Standard (SFRS) and are the basis of this Financial Reporting Standard International Financial Reporting Standards (IFRS). The adoption of this SFRS has been binding on factories since 2003. The key principles on which SFRS is based are Accrual Based accounting. The Singapore Financial Reporting Standard (SFRS) differs from International Financial Reporting Standards (IFRS) in several respects. SFRS differs from IFRS in respect of accounting for foreign exchange. While IAS 12 stipulates that a deferred tax calculation is required for a temporary change from a non-derivative foreign exchange, SFRS does not require an accounting for a non-deductible foreign exchange if the entity is able to manage the deferral period for minor variances. The Singapore Financial Reporting Standard (SFRS) FRS 16 allows for a single asset review of the assets that occurred in the period 1984 to 1996 without requiring continued use of the revaluation model. A single review review refers to a situation in which a PPE item is reviewed simultaneously from 1984 to 1996.

India : The Financial Reporting Standard used in India is the Indian Accounting Standards and compliant with IFRS standards according to the board. IFRS standards are not required for financial reporting in local Indian companies and are not officially committed to IFRS standards. Ind AS and IFRS differ in various aspects. India items include balance sheet, profit and loss statement, cash flow statement, equity variance statement, statement of financial statements and disclosure of accounting policies. In contrast, IFRS financial statements components include a statement of financial position, a profit and loss statement, a variance in the equity statement for a period of time and a statement of cash flows for a period. While India does not have a specific balance sheet and only includes guidelines, IFRS has appropriate guidance regarding the format of the balance and requires the entity to represent liabilities and assets and classify them as current or non-current assets (ICAI, 2020)

While India does not have a specific income or loss statement format and includes only guidelines, IFRS includes two types of presentation: single-format format or double-format format. One statement contains only profit and loss but two statements include the classification of various income statement items such as operating and non-operating expenses, gains and losses. India also differs from IFRS in terms of accounting policies and variations in accounting estimates. India allows for variance in accounting policy in the case of a different accounting policy as required by law, adhering to accounting standards, if it is subject to changes that may result in a financial statement. IFRS IAS 8 states that variance in accounting policy can be made in two cases which means that it is mandatory for IFRS, resulting in an appropriate financial statement relating to the current financial position of the entity. India requires that the amounts reported are the same as those included in the financial statements. IFRS requires an entity to analyze the nature of a functional currency

Therefore, GIC should take into account this diversity as it expands the international market of Singapore and India. This will help to create a more accurate financial statement and a more accurate comparison of financial performance.

Conclusion:

The inclusion of financial reporting standards helps to increase the visibility of financial reporting globally. The adoption of international financial reporting standards is essential in facilitating cross-border transactions and ensuring free international flow of funds. IFRS acts as a common international language and helps to conduct business across international borders by creating comprehensible and comparable accounts. It is the result of the rise of overseas stocks and is important for companies like GIC operating in various countries.

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